the changing taste of beer

Grappling with consumers’ growing interest in wine and spirits, major beer manufacturers are turning to new tastes and flavorsand, in some places, it’s working.

By Ross Markman Retail Relations Editor

Forget for a moment about the rising tide of wine and spirit sales and that traditional beer companies in recent years have introduced everything from seasonal brews to fruit-flavored versions of their core brands.

This is the true sign of how far beer has come: A family brewery in the Czech Republic has converted its cellar into the world’s first beer health center, complete with beer baths, beer massages and beer cosmetics, as well as seven huge tubs where guests can hone their backstroke in beer while stopping to sip on, well, beer.

The health center targets men, who aren’t as inclined to visit traditional spasironic considering the American beer market, which finds itself entrenched in a struggle with its rivals in the wine and spirits channels, and has turned its attention to specialty beers, which, in many ways, cater to women.

The State of Beer

While the recent State of the Industry Report issued by the National Association of Convenience Stores (NACS) indicates that c-stores climbed 20.2% to reach a record $474.3 billion in sales in 2005, the sale of traditional beers in many markets is on the decline.

Beer, according to the SOI data, accounted for 11.7% of instore sales (14.3% when only considering stores that sell beer) last year, ranking it fourth among all categories, behind cigarettes, packaged beverages and foodservice. Beer accounted for a slightly greater share in 2004, with 11.9% of sales.

Many beer manufacturers have turned to the flavored and specialty genres to help lure back customersparticularly the 21- to 30-year-old demographicwho are increasingly turning to wines, spirits and energy drinks, or, in many cases, a blend of both.

“The reality is that beer still outsells wine and spirits combined, and makes up 60% of all alcoholic beverage occasions,” said Pat McGauley, vice president, innovation of Anheuser-Busch, the country’s leading beer manufacturer. “It’s important to keep beer fun, relevant and in step with the changing preferences of adults who enjoy beer.”

The transition to nontraditional beers hasn’t been easy for retailers. Consider Presto Convenience Stores, an Andover, Kan.-based chain with 43 stores, 40 in Kansas and three across the border in Missouri. Because of state law, Presto’s Kansas stores cannot sell beers that contain more than 3.2% alcohol, so they stick with their big three: Miller, Bud and Coors. The chain’s Missouri stores, however, offer a much wider variety of brews, particularly because fewer people are buying traditional beers.

“On the Missouri side, we’re experiencing great success with these other beers, because the big guys are struggling,” said Doug Wald, Presto’s vice president of operations. “That’s why we’re having such a tough time keeping the category going forward. We can’t sell the other stuff in Kansas.”

Presto’s most significant gains in Missouri have been from the sale of Corona products as well as a local beer made by Boulevard Brewing Co., a sunshine wheat pale ale who’s description alone epitomizes today’s beer industry trends.

The larger beer manufacturers, according to Wald, are struggling to compete with their smaller stepsisters. Some have introduced energy beers, spicy beers and a potpourri of other flavors in efforts to keep their customers.

“They’re trying to get that consumer back into their brands, but I honestly think the baby boomer generation has left the idea of regular beers,” Wald said. “If they’re going to drink beer, they’re going to drink the better beers, the more flavorful beers.”

Many consumers in Presto’s market have left beer for wines, whiskeys and other spirits. And younger drinkers the newly legal consumersare turning to vodka mixed with energy drinks, often Red Bulla trendy cocktail among the 20-something crowd.

“In the 22 years I’ve been in the convenience store business, I’ve never had it where the beer category wasn’t just simple growth,” Wald said. “But these last two years, we’ve just struggled.”

The “in” Thing to doPresto isn’t alone. Convenience retailers throughout the country continue to encounter the same problem: Americans are gradually consuming more wine and hard liquor, and less of the old faithful of alcohol: beer.

George Kaiser sees this evidenced in his only store, Kaiser Grand Mart, in St. Louis, Mo.; he has plans to open a second store in nearby Webster Grove later this year.

“I know for a fact that last year our beer sales were $390,000,” Kaiser said. “This year, they were only $350,000.”

Not a business-altering drop, but still a drop. And that trend threatens to continue.

Chad Kaiser, George’s son and business partner, said the family c-store is situated in a lesser-income area of St. Louis and therefore doesn’t attract as many alternative and specialty beer drinkers that its competitors elsewhere might. Some of the more colorfully named products starting to do perform well include Pink Dragon, Island Bus and Mike’s Hard Lemonade, which when founded in the late 1990s was one of the first flavored beers, or malternatives, to make a dent in the convenience channel.

“The trend in the convenience store is the same as it is in bars in St. Louis,” Chad Kaiser said. “You notice more people with mixed drinks than beers even guys, where five, 10 years ago, that wasn’t the in thing to do.”

What’s “in” these days, according to Paul Gatza, director of brewing for the Boulder, Co.-based Brewers Association, is major beer manufacturers striving to improve the reputation that traditional beer has in the marketplace, particularly to new drinkers.

A few months back, Anheuser-Busch launched “Here’s to Beer,” a multipronged advertising campaign that features television commercials depicting people from various countries hoisting a glass or pint of beer and offering a toast in their native languages. The overall goal is to boost beer sales and stabilize market share.

“For the big beer manufacturers, the problem is there is a lot of excitement with the craft brewers, which grew 9% last year and at a slightly higher clip in convenience stores,” Gatza said. “At the same time, traditional beers are declining or staying at the same level.”

“To some degree, they’re going after people who are relatively new to the drinking age, to keep them from mixing a spirit with an energy drink,” Gatza said. “With the fruit beers, the stereotype is it’s marketed toward women. There are just so many other options out there today.”

Gatza cited the spirits industry’s innovations in packaging and the creation of dozens of new flavors as key factors in the decline of traditional beer sales. Hundreds of vodkas are on the market, and plenty of them are flavored ”Fifteen years ago, none of them would have been flavored,” he said.

“There’s an overall cycle, but I think the beer industry will keep up,” Gatza said. “Wine and spirits are popular for a few years, then they go out of fashion. Everything just seems to have collided right now.”

Bill Gordy’s four TigerMart stores might be a perfect example of that collision. Each store, which sells either Exxon or Mobil fuel, is equipped with beer caveswalkin coolers featuring stone-front entrances that have significantly boosted inside sales at the Delmar, Del.-based chain. Gordy’s stores have experienced strong sales in nontraditional beer products, fro
m Sam Adams’ eight seasonal varieties to Dogfish, a Delaware-based microbrew, to malt beverages such as Bacardi, Smirnoff and Zima.

“We believe women are the target audience for most of these nontraditional products,” he said, echoing Gatza’s comments. “But one of the new categories to get big is the energy category, which has spilled over from the beverage segment.”

Beer companies, Gordy added, are trying to capitalize on that trend, prevalent among younger drinkersboth men and women.

His TigerMarts now sell beer and malt liquors that offer the energy component, including B-to-the-E, Tilt and Sparks. Results have been mixed.

“While the beverage category-has increases of 300% or better in the energy segment, the alcoholic versions have not caught on as well,” he said. “It appears that customers-prefer to mix their own energy drinks with alcohol or enjoy the energy products without it.”

Beer’s FutureWith flavors, such as Spring Heat Spiced Wheat and Peels already on the market, and a blueberry-flavored beer on the horizon, manufacturers like Anheuser-Busch appear determined to keep their current customers and seduce new drinkers to their share of the beer pie.

“For the beer purists to novices who are looking for variety, we believe flavored brews are something that all consumers will find appealing,” AB’s McGauley said.

Wald, of Presto Convenience Stores, simply plans to continue following the latest beverage fad and giving the customer what he/she wants.

“I personally think this trend is going to continue,” Wald said. “But, if you had asked me two years ago if I’d be selling things like blueberry beer and herb-spiced ales, I would have said, ‘No way.'”

Online Partners

Browse the latest issue of Convenience Store Decisions and back issues in an easy to use high quality format. Bookmark, share and interact with the leading C-Store magazine today.

Need C-Store News in a minute?
C-Store Decision Enewsletters get you caught up on all the convenience store news you need. Sign up today.

Convenience Directions

The Convenience Directions concept has been in place for over 15 years in the convenience store industry. What we do is very unique in that
we combine the InfoMarketing newsletter, which is mailed quarterly to over 10,000 c-store executives, with three Idea Exchange meetings.

Print Subscription

NAG Convenience Conference

The National Advisory Group (NAG) is a dues paying association committed to building relationships and profits. NAG’s mission is to provide retail leaders of small to mid-size and family-owned convenience chains a peer-to-peer forum for the exchange of ideas to improve their business performance.